Transcript: Senior WH Adviser Valerie Jarrett

ABC NEWS, THIS WEEK WITH GEORGE STEPHANOPOULOS INTERVIEW WITH SENIOR WHITE HOUSE ADVISER VALERIE JARRETT

GEORGE STEPHANOPOULOS, HOST: It was one year ago this week that
Barack Obama made history with his sweeping win over John McCain. How
much has he changed the country? How much has the office changed him?
We have the "Roundtable" standing by to debate those questions and all
of the week's politics, including Harry Reid's role in the public
option, and the GOP civil war that has forced their nominee out of
Tuesday's congressional race in Upstate New York.

But first, let's check in with one of the president's closest
friends and advisers, White House counselor Valerie Jarrett.

Welcome to the THIS WEEK.

VALERIE JARRETT, ASSISTANT TO THE PRESIDENT FOR INTERGOVERNMENTAL
RELATIONS & PUBLIC LIAISON: Thank you, George. It's a pleasure to be
here.

STEPHANOPOULOS: Let me bring you back to one of -- probably one of
the best moments of your life, one year ago this week, when President
Obama accepted the verdict of the country's voters. Here is what he
said that night.

(BEGIN VIDEO CLIP)

BARACK OBAMA, THEN-PRESIDENT-ELECT: Let's resist the temptation to
fall back on the same partisanship and pettiness and immaturity that has
poisoned our politics for so long. And while the Democratic Party has
won a great victory tonight, we do so with a measure of humility and
determination to heal the divide that have held back our progress.

(END VIDEO CLIP)

STEPHANOPOULOS: One year later, the president's economic plan has
passed, but with no Republican votes in the House, only three in the
Senate. It sure looks like right now no Republican support, the health
care bills, as they are going forward in the Congress.

And our polling shows that this partisan divide persists on issue
after issue after issue. Why has that core promise of the president's
campaign, healing the divide, gone unfulfilled?

JARRETT: Well, you should ask that question to the Republican
Party. I mean, frankly, just listening to the president's words again,
it brought back terrific memories, and I think his message was a
profound one. And he has stayed true to that message. He has reached
out. He has listened. He has reached across the aisle.

Just recently meeting with both the Democrats -- the Republicans and
the Democrats in both the House and in the Senate. His effort has been
sustained throughout the year. And the fact...

STEPHANOPOULOS: So the president bears no responsibility for the
failure to get Republican votes?

JARRETT: Well, I think -- I think what we look to the president to
do is to lead by example. He has reached out. He has listened. He has
included very helpful advice from the Republicans when it has been
forthcoming. But the fact...

STEPHANOPOULOS: But not their ideas in the legislation..

JARRETT: Well, actually, that's not true. There have been examples
of where he has included their ideas. And ultimately whether they vote
for a piece of legislation or not, doesn't mean that it hasn't been an
open and fruitful process.

STEPHANOPOULOS: So the president doesn't feel he needs to change
the way he does business at all, to reach out more to Republicans, to
get more Republicans buy-in?

JARRETT: Oh, George, listen. He is constantly reaching out to
Republicans. Both he and his team. And he will continue to do that.
But ultimately it's up to the Republicans to decide if they want to be a
constructive force and come to the table and work with us in a positive way.

We want to hear good ideas. The president is known for listening
most closely to those with whom he disagrees. So the door is always open.

STEPHANOPOULOS: Does that mean, for example, that Speaker Pelosi
should give the Republicans a vote on an alternative in health care?

JARRETT: I'm not going to in any way comment on what the speaker
should do. She is an extraordinary leader and she is going to continue
to do that. And she is going to reach out in a way that she deems
appropriate.

But your question is what is the president's leadership about it,
and hearkening back to the message from last year, and I think he has
been consistent not just here, domestically, but also around the world
in the way he has reached out.

STEPHANOPOULOS: Well, to follow through, shouldn't he ask the
speaker then to give Republicans a vote?

JARRETT: To give them a vote and give them a voice. It gives them
an opportunity to contribute constructively. That doesn't mean that you
actually have to change what you think is in the best interests of the
American people simply to get a Republican vote.

What you do is you reach out, you listen, you collaborate, but
ultimately, the president is accountable to the Republican people -- to
the American people, sorry.

STEPHANOPOULOS: Let's talk about this election coming up Tuesday in
Upstate New York. The president created a vacancy by making John McHugh
-- Congressman John McHugh, the secretary of the army. And now there
appears to be a bit of a Republican civil war going on there. The
Republican nominee, Dede Scozzafava, was forced out of the race by a
conservative challenger.

And I know that the president's political team is hoping to convince
her to throw her support to the Democrat, Bill Owens. Any luck on that?

JARRETT: Well, we'll see. We would love to have -- of course, have
her support. And it's rather telling when the Republican Party forces
out a moderate Republican and it says I think a great deal about where
the Republican Party leadership is right now.

So of course we would love to have her support, and those are the
people who are going to vote for her.

STEPHANOPOULOS: What does it say about where the Republican Party
leadership is?

JARRETT: Well, I think it's becoming more and more extreme and more
and more marginalized. Look at the number of people who actually say
that they are registered, consider themselves a Republican. And if
that's the direction they want to go find, what we're going to do is
what we've always done, and that is, we're going reach out, we're going
to try to include as many people to be a part of our governing process,
being open, being transparent, and we're going to let the American
people decide.

And right now what you see is a great deal of momentum moving
forward, for example, on health care. The American people want change.
They don't want the same old health care system that is not affordable,
that doesn't offer coverage to everybody, that keeps escalating in costs.

And what we've seen from the Republicans is really a desire to have
the status quote. And, George, that's not acceptable anymore.

STEPHANOPOULOS: Our latest polling shows that there is not majority
support for the president's health care plans.

JARRETT: Well, we actually think that there is. And I suppose it
depends upon what poll you're looking at. But as more and more word has
gotten out about what health care reform is all about, whether it's our
desire to make it affordable, whether it's to cover all people, whether
it's to make sure that people who have pre-existing conditions don't
lose their coverage, whether if somebody changes a job, they don't lose
their coverage, if somebody is unemployed they don't lose their coverage.

All of these are extraordinarily important to the American people.
This has been an unusual process. It has been open, it has been
transparent. Oftentimes the sausage-making in Washington is a little
bit off-putting.

But look how far we've come. George, five different committees have
approved health care. It's now being debated. And all of those five
committees have -- the content of those bills is consistent with what
the president put forward.

STEPHANOPOULOS: You know, you say that all five bills are
consistent with what the president has put forward, but the bill coming
out of the Senate Finance Committee includes a tax on these high-priced
insurance plans.

Senator Charles Grassley, the Republican ranking member of that
committee has looked at Joint Tax Committee figures, and according to
those figures, it shows that 46 million families making less than
$200,000 will eventually see their taxes go up under this plan. That
would break the president's promise not to raise any taxes on people
earning under $250,000 a year.

So how can you say that's consistent with his plan?

JARRETT: Yes, well, first of all, there are lots of different
analyses of the plans, and until we have a final bill, let's hold off
prejudging what it's going to do. But the president has been clear, he
does not want to impose a tax on the middle class. That's why
immediately upon taking office, when the Recovery Act was passed, it
provided a tax relief to the middle class, something -- a very big point
he made in the course of the campaign.

STEPHANOPOULOS: Well, then let me press this point, because it's
not just Republicans who say this. You've got union leaders like Gerry
McEntee and several others have said this is also a tax increase on the
middle class. You've got 180 House Democrats who are saying the same
thing, saying that that's why they're opposed to it.

So are you saying that the president will not sign this proposal if
it does indeed raise taxes on the middle class?

JARRETT: What I'm saying to you, George, is, let's let the process
go forward. Let's not pre-judge to the end. There have been so many
constructive conversations going on as recently as Friday with the
various leadership in both the House and the Senate.

And I think what the president has said is, look, we do not want to
have any additional tax burden on the middle class. We want to have
affordable health care. We want to make sure that people who have not
had insurance before have it. We need to bring down the costs, because
that's going to help our federal deficit...

STEPHANOPOULOS: So if...

JARRETT: All of those parameters -- and no, what I'm saying is that
I'm not going to leap forward to the end. What we're going to do...

STEPHANOPOULOS: But don't you have to set the bottom line for the...

(CROSSTALK)

JARRETT: No, no. What you do and what he has done, and what has
brought us to the point where we are right now where we have five bills
for the first time in history, after decades of effort, what he is doing
is working. And what he is doing is talking constructively.

His team is up on the Hill every single day, meeting with the
leadership, meeting with all of the different members. And we're going
to see where we go. And he has made it clear, as I said from the
outset, what his parameters are. And he's constantly...

STEPHANOPOULOS: So he will not -- bottom line, he will not violate
that commitment, is what you're saying?

JARRETT: What I'm saying is that he is confident that a bill that's
going to be passed is going to be consistent with his parameters, yes.

STEPHANOPOULOS: OK. Let's talk about Afghanistan for a second. We
see today the opposition candidate to President Karzai, Abdullah
Abdullah, has said he's not going to run in the run-off. Is this a
welcome development or is the White House worried the questions about
this election will cast a cloud over President Karzai and make it more
difficult for the president to implement his strategy?

JARRETT: We don't think that it's going to add a complication to
the strategy. It's up to the Afghan people and their authorities to
decide how to proceed going forward. We watched the election very
carefully. And we're going to work with the leader of the Afghan
government and hopefully that's going to improve the state of conditions
for the people in Afghanistan, and also help us as we try to bring this
war to a close.

STEPHANOPOULOS: So this is not a complication as far as you see it?

JARRETT: No. We don't see it as a complication.

STEPHANOPOULOS: And we also -- we're getting some word following
the president's meeting with the joint chiefs on Friday that the target
date for announcing this decision may be slipping a bit. The president
wants some more information from the Joint Chiefs.

Is it now possible that it's going to come after the president
returns from Asia, more like the end of November than the middle?

JARRETT: What the president has said consistently is he is going
through a very rigorous process. George, before he puts our men and
women in harm's way, he wants to make absolutely sure that he has a
strategy. This isn't just a matter of how many troops are sent over.
Although that is a very important component.

We have to look at what's going on on the ground. We have to look
at what our allies are doing. We have to look at the state of the
government in Afghanistan. And he's looking for a strategy that leads
to keeping our nation safe. And so the timing for that is completely up
to the president, who makes the decision when he is confident that he
has all of the facts that he needs to make the right decision for our
country.

STEPHANOPOULOS: So it could be later in the month.

Let me just -- also this week the president went to Dover. And we
want to show our audience some of the pictures from that. The president
seemed -- did seem quite moved, almost stricken at times during that
visit. It had quite an impact on the president, didn't it?

JARRETT: How could it not? I mean, my goodness, to meet the
families of people who have given their lives, the maximum sacrifice to
our country? Of course he was deeply moved by the experience. Anyone
who was there would have to be.

STEPHANOPOULOS: Did you have a chance to talk to him about it and
how do you think it will affect his decision-making?

JARRETT: I think that he is going to make the decision that he --
that he thinks is right for the American people. It certainly is a
reminder of what is at stake. And you talk about 40,000 troops, behind
every troop is a family. And it's a huge sacrifice that we're asking
our men and women to make.

And I think going to Dover and showing respect on behalf of our
country for that sacrifice was something that was very important to the
president. But ultimately he is going to make the decision that he
thinks is going to keep our country safe.

STEPHANOPOULOS: One final question, the president received both
praise and criticism for doing that visit with television cameras
there. Why was it important for the president to do that somewhat in
public?

JARRETT: Well, he wouldn't have done it in public if the families
had objected. So the first and foremost thing is what is important to
the families. And I think that it's important for us all to recognize
what is at stake. And so when you talk about numbers, like 40,000
troops, as I said a minute ago, I think it's a reminder about how deep
the sacrifice is.

And it's something that's open and transparent, and it was a way for
him as the president to convey to those families on behalf of the
American people how much we appreciate that enormous sacrifice they've
made.

STEPHANOPOULOS: Valerie Jarrett, thanks very much.

JARRETT: You're welcome. Good to see you.

STEPHANOPOULOS: We're going to go straight to the roundtable, so as
our panelists take their seats, we have a little bookend to that
election night excerpt we showed from President Obama. Gracious words
from Senator McCain.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R-AZ), THEN-REPUBLICAN PRESIDENTIAL NOMINEE:
Senator Obama and I have and argued our differences, and he has
prevailed. No doubt many of those differences remain. These are
difficult times for our country. And I pledge to him tonight to do all
in my power to help and lead us through the many challenges we face.

(APPLAUSE)

(END VIDEO CLIP)

STEPHANOPOULOS: We're going to go straight to the roundtable, so
as our panelists take their seats, we have a little bookend to that
election night excerpt we showed from President Obama. Gracious words
from Senator McCain.

(BEGIN VIDEO CLIP)

MCCAIN: Senator Obama and I have and argued our differences, and
he has prevailed. No doubt many of those differences remain. These
are difficult times for our country. And I pledge to him tonight to
do all in my power to help and lead us through the many challenges we
face.

(END VIDEO CLIP)

STEPHANOPOULOS: One year ago this week. With that, let me bring
in our roundtable. I am joined as always by George Will; Ed
Gillespie, counselor to President George W. Bush; Ron Brownstein of
the National Journal; Dee Dee Myers, press secretary to Bill Clinton;
and the Reverend Al Sharpton. Welcome to all of you.

And let me just begin with the threshold question. We're about a
year out from the election. Has the president delivered on that
promise of change?

WILL: I think domestically and in foreign policy, he has. His
one great achievement is to enhance the status of the United States.
Now, that happens to have zero cash value, it turns out. The
Iranians, the North Koreans, the Afghan government, China and India
regarding carbon limitations -- he's made no progress on any of these
fronts, but people like us better. So I suppose that's an
achievement.

SHARPTON: I think he absolutely has changed -- I agree with
George. He's changed the perception of America. I think that he's
also changed some things here, the economy. When you look at the GDP,
up 3.5. When you look at 30-year mortgages at a lower rate than it's
ever been...

STEPHANOPOULOS: Be careful there. Unemployment almost 10
percent.

SHARPTON: Unemployment -- again, the hardest thing once you
bring an economy back, is the jobs. I think he has to finish the
task.

Let's remember, George, he's only been there 10 months as
president. In nine months, he's helped restore America's image, he's
helped to stop the hemorrhaging of jobs, and bring the economy back.
So in nine months, what it usually takes to make a baby, he's starting
the rebirth of America.

STEPHANOPOULOS: And Ed Gillespie, I was thinking of you as
Valerie Jarrett was here talking. Basically, her answer on why this
partisan divide hasn't healed at all is it was the Republicans' fault.

GILLESPIE: Right. Well, it's always the Republicans' fault if
you listen to this White House, and I think that's one of the
disappointments, I think, frankly, for a lot of us Republicans,
independents, is that this has not been a post-partisan presidency, as
we were led to believe. In fact, it's been a very partisan White
House, very political in its nature.

And just, for example, I've heard Valerie Jarrett say, well, in
terms of health care reform, you know, no Republican support. Well,
look at what's happened in that debate. The things that got Olympia
Snowe's vote in the United States Senate, they dropped and so yet they
contend they're looking for Republican support. They eliminated the
one Republican they had a shot of getting so far. The president in
his Joint Session speech talked about medical liability reform. The
Pelosi bill punishes states that put a limit on attorney's fees or put
a cap on damages. So when you look at their actions relative to the
rhetoric, I think that accounts for the bipartisanship.

STEPHANOPOULOS: I want to get more to health care later. But
first, Dee Dee, on this broader question, the president obviously came
in with more popular support than Bill Clinton had in 1993 but similar
numbers in both the House and the Senate. And they did seem to make
the choice, not unlike the choice in 1993/'94 to secure the Democratic
base first on their big pieces of legislation.

MYERS: Well, I think after some consultation in the early weeks
and months, they ran up against the reality. It's true the president
has in some ways changed the tone, but he's also in these nine short
months, 10 short months shown the limitations of bipartisanship. You
can talk a good game, you can go meet with people and you realize
they're just not going to be for you and so that leaves you no
alternative than to secure your base. You have to get the votes out
of your base. And if you can pick off one or two people in the middle
like Olympia Snowe, moderate Republican, to call the bill bipartisan,
great. But if not, then you have to be able to pass legislation with
Democrats.

BROWNSTEIN: These are much more structural problems than really
dealing with one president in their control. We are moving much
closer to something like a parliamentary system in this country where
each party is now much more the base, the coalition is much more
ideologically homogeneous than it was a generation ago and that exerts
tremendous and typical pressure for legislators on one side to stand
with their side against the other on almost every major issue.

I think Obama wants to bring in Republicans but he wants to do so
by addition. He's willing to add Republican ideas, I think, to his
package. Republicans need -- really need subtraction.

I mean that even if, for example, you have medical malpractice
reform in the health care bill, there are very few Republicans today
who could vote for an individual mandate, which is the cornerstone of
the bill, even though that was the Republican alternative to Hillary
Clinton's plan in 1993.

I think the parties are structurally moving apart, and it is very
difficult for either side to win substantial support on their
legislative priorities from the other. That is just a reality of our
politics today.

MYERS: But it's worth noting that twice as many people, American
people, think Obama and the Democrats have tried harder to reach
across the aisle than Republicans.

WILL: But the reality is the Democrats have a very clear agenda,
unified theory of this administration and it is equality, understood
as equality of outcome. And, therefore, every proposal the president
has from dealing with General Motors to the United Autoworkers to
health care is to increase the number of Americans equally dependent
on the federal government for more and more things. And I don't think
the American people at the end of the day want that.

SHARPTON: Well, I think that you cannot get by Dee Dee's point.
I think that the American people have said very, very clearly that
they think that this administration and the Democrats have been the
ones to reach out. We're waiting to see the Republican that emerges
that reaches back. Even on education reform, the president has Newt
Gingrich and I touring together. I mean, you can't reach out more
than to try to get Newt Gingrich and I to go on tour together.

I think that he has reached out. I think at some point, there
will be a tremendous backlash on the Republicans when they don't reach
back. And I think that that is the problem that they're having in a
lot of these pollings that we're seeing.

BROWNSTEIN: I was going to say, look, the president has had some
success and broadening his coalition outside of Congress. He has had
more success than Clinton did at bringing in business interests on
really all of the major initiatives whether it's on cap and trade with
some of the major utilities...

STEPHANOPOULOS: Or health care policy.

BROWNSTEIN: But the underlying fact I think is George is correct
whether you characterize it the way he did or not, what Obama and the
Democrats want to do and what the Republicans fundamentally want to do
at this point, the gulf is so large, it is very difficult to see them
coming together in meaningful numbers.

And if you say what Obama has done in nine months, he really has
changed the frame of debate. The stimulus plan included more net new
public investment and the things that Democrats prize, like education,
alternative energy than Clinton was able to achieve in his eight
years.

And let's not forget that he is within sight now of a health care
bill that has defeated every president who has tried it since Franklin
Roosevelt. So he is changing the terms of the debate. There are
political costs, we'll talk about those later, but he is shifting what
we're discussing and what the solutions we're discussing are.

STEPHANOPOULOS: One area where we've seen less change than
actually I would have expected is on the issue of race relations in
the United States. Remarkable poll from the Gallup organization this
week. They asked, "Do you think that relations between blacks and
whites will always be a problem for the United States, or that a
solution will eventually be worked out?" You go back to December
1963, 42 percent thought it would be a problem, 55 percent thought it
would eventually be worked out. By November 2008, the number thought
a year ago on Election Day, it would be a problem, had gone down quite
a bit.

STEPHANOPOULOS: And the number who thought it would be worked
out had gone up.

But look at October 2009, right back to where we were, basically,
in November 1963, despite all the changes we've had in those times,
Reverend Sharpton.

SHARPTON: Because I think the structural inequality is still
there. The reality is that you still see the race gap in education,
in employment, in health care. And I think the reality has sobered a
lot of people up.

I think what the president has done is tried to reach out and
bring people together, and I think everyone appreciates that. But I
think people are looking at the reality.

So a year after his election, with all the hope of Americans
coming together and the great symbolism of having an African-American
president, I don't think we've lost that; I think we just sobered up
to the reality. We've learned that he can't walk on water, but he's
still the best swimmer in national politics.

(LAUGHTER)

STEPHANOPOULOS: Best swimmer, George?

WILL: When a poll shows something that is so obviously
preposterous, they ought to go back and look at the poll. The Voting
Rights Act, public accommodations act, enormous changes in education
in the United States, access to college -- we've made enormous
strides. And for them to say essentially nothing has changed is just
nonsense.

Watch the election in Atlanta this week.

(CROSSTALK)

WILL: ... mayor. A black city may be about to elect, for the
first time in, what, two generations, a white mayor. Now, that
indicates a, kind of, coming of the real color-blind nature of our
politics.

(CROSSTALK)

MYERS: The same thing may (ph) happen in Atlanta.
GILLESPIE: No, I think -- the (inaudible), George, is that it's
-- we're moving the goal posts in a good way. You know, we've always
got to do better, but the fact is, I can tell you, my children have
grown up in a more color-blind society than I grew up in, and I grew
up in a more color-blind society than my parents grew up in. And we
have made great progress.

The election of President Obama was a proud moment for the United
States of America in that regard.

But, that said, I think what you see is an American public that
says, you know what, we've got to keep striving. And I think that's a
positive thing.

BROWNSTEIN: Each cohort -- each younger cohort in American life
is more diverse than the one older. We are becoming inexorably a more
diverse society. This was the first election in American history more
than a quarter of the voters were nonwhite. That number isn't going
down. It's only going up.

Now, having said that, there is a red flag out there that goes
back to what George was saying before, I think. There are very --
there are divergent views between white and nonwhite America over the
role of government, and that is widening at a really -- almost at an
ominous rate.

I mean, white America is moving, I think, by and large, in a
very, kind of, Perot-esque direction. There is, kind of, a backlash
against some of the ambition of what Obama is pursuing and the
Democrats pursuing across the board, whereas there is much more
tolerance in nonwhite America for a larger, more expansive federal
role.

And that skepticism about institutions that you see in big chunks
of the white electorate, contrasted with the support in the nonwhite
electorate, is, kind of, an unstable phenomenon.

STEPHANOPOULOS: It's going to reach such tension next year, as
the president goes forward. We're going to take a break in just a
minute.

Before we do, there's a new book out by President Obama's
campaign manager, David Bluff -- Plouffe -- called "The Audacity to
Win."

And, Reverend Sharpton, there's a fascinating little excerpt
about you in the book. He describes a moment on Christmas Eve 2007,
very close race in Iowa, where President -- then Senator Obama calls
Plouffe as Plouffe is in church, because he's worried -- he's gotten
word that you might be coming to Iowa, and that is not entirely good
news for him.

On the one hand, if you're coming to endorse Hillary Clinton,
they're fine with that, but they felt that, if you were coming to
endorse him, it might create problems for Obama that they didn't want.
The way it ends us, you don't come. They say you played a
constructive role the rest of the campaign. What happened?

SHARPTON: There was a group that tried to get me to come in, and
I think they were -- this was at the time when they were trying to
really go for these race politics and miscast...

STEPHANOPOULOS: Coming for Obama.

SHARPTON: No, they wanted me to come in, period, on a race
issue, which, really, you'd have to be hard-pressed to really deal
with that in Iowa.

(LAUGHTER)

But we determined it was a distraction (inaudible). And I picked
up the phone and called then-Senator Obama and said, I'm not going to
be used like that. And I've worked, as they said, constructively
throughout the rest of the campaign.

Because, even though he and I may not agree on every strategy, I
think that, once you decide you want to work with someone, you do what
is best, whether you're out front or behind the scenes.

STEPHANOPOULOS: OK, we're going to take a quick break. We'll be
back with more roundtable in just a minute, and later, the Sunday
funnies.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, HOST, "THE LATE SHOW": Because of the weather
and due to the low ceiling -- listen to this -- earlier this afternoon
a Northwest Airline airplane, passenger plane, accidentally landed at
the correct airport.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

STEPHEN COLBERT, DAILY SHOW: Staunch conservative George Will
has for the last two Sundays on ABC's THIS WEEK wore a long tie.
Clearly his bow ties were the only thing tethering George Will to
reality.

WILL: Marijuana is getting much better.

COLBERT: Then he tried to eat George Stephanopoulos because he
thought he was a teddy graham.

WILL: We legalized prostitution, as anyone who opens a telephone
book and looks under escort can tell you.

COLBERT: I don't now which is more disturbing, that George Will
goes to prostitutes or that he still uses the phone book.

(END VIDEO CLIP)

STEPHANOPOULOS: George Will's star turn on "Comedy Central," you
and Steve Colbert.

I want to bring you back in here along with Ed Gillespie, Ron
Brownstein, Dee Dee Myers and the Reverend Al Sharpton. I could ask
you to respond but we can go straight to the politics of the week.
First time I've ever seen George Will blush.

MYERS: Yeah.

STEPHANOPOULOS: A lot of elections coming up this week. Let's
show the latest polling in these gubernatorial races and important
congressional race. No. 1, down in Virginia, Creigh Deeds, the
Democrat, about 10 points behind in the latest "Washington Post" poll
to Bob McDonnell, the Republican.

Up in New Jersey, Jon Corzine, the incumbent, 43 percent, Chris
Christie, Republican, 38 percent and Independent Chris Daggett has 13
percent. That race really too close to call according to most of the
polling right now.

And then this congressional district up in upstate New York, New
York 23. John McHugh left to become secretary of the army. It was a
dead heat according to the poll that came out from the Siena Research
Institute yesterday between the Democrat Bill Owens, the conservative
candidate, Doug Hoffman, the Republican Dede Scozzafava was far behind
at 20 percent.

And yesterday, George Will, she dropped out of the race. A lot
of big Republican power brokers had come in on either side of this
race. Sarah Palin came in for the conservative candidate. So did Tim
Pawlenty. Newt Gingrich, the former speaker came in on behalf of
Scozzafava and he said something interesting in "The New York Times"
this morning. And he said, he warned about an impending civil war in
the Republican Party. He said "If we get into a cycle where every
time one side loses they run a third-party candidate, we'll make
Pelosi speaker for life and guarantee Obama's re-election."

WILL: If they had done what Newt Gingrich urged them to do in
that district, the district probably would have gone to a Democrat and
would have lost a seat. Newt was just tone deaf as were the people
who picked this woman. Who is a candidate of among other things the
working families party which is a wholly owned subsidiary of the
Public Employees Union. She's for tax increases, same-sex marriage.
She's for abolishing the right of secret ballot in union elections.
There's already a party for people who think like that. It's called
the Democratic Party.

MYERS: It was interesting that she was chosen by the county
party chairs, 11 people got in a back room and chose her for some
reasons that may have to do with state party politics and not to do
with winning. But there's no question -- it will be very interesting
to see what lessons both Democrats and particularly Republicans take
from this. Is this going to be a carte blanche for conservatives to
take on more moderate incumbents in primaries?

GILLESPIE: Well, look, Dee Dee's point is a very important one.
This nominee, Scozzafava was chosen by 11 people behind closed doors.
Disenfranchised Republican primary voters and that led to I think a
lot of greater --

STEPHANOPOULOS: It was a caucus process, wasn't it?

GILLESPIE: It's a process but it doesn't make it a good one.
The fact is that a lot of Republicans said, wait a second, she wasn't
a moderate Republican as George pointed out. She is a liberal
Republican. Daily Kos, the left wing Web site endorsed her over the
Democrat. The fact is I think Republicans, many of whom support her
because she was the Republican Party nominee, and there is an
obligation that have you in the party to support the nominee are
relieved today at the opportunity to pick up this seat now.

And I think that if you look at the 20 percent that Scozzafava
was getting in that poll, I suspect that breaks about 3-1 to Hoffman
at the end of the day.

STEPHANOPOULOS: And Ron, the Republicans almost certainly will
now win.
BROWNSTEIN: It seems the momentum is there. It sends a mixed
message for Republicans out of this. On the one hand, I think it's
going to be another indication, I think we'll see others on Tuesday,
that there is energy in the small government, anti-spending argument
at this point.

On the other hand, the fall of the Dede as I think she's known
now, I think is a sign that the leash that the base is holding on the
party is tightening and that the Palins, the talk radio, the Rush
Limbaughs, the FOX, the definition of what is acceptable as a
Republican I think is narrowing.

I mean this does come after Arlen Specter essentially was forced
to leave the party after voting for the stimulus, after Chuck Grassley
faced threats, open threats of a primary challenge if he compromised
with Max Baucus.

In the long run -- in the short run, there's clear energy here in
the small government, anti-government argument. But in the long run,
I do wonder about whether Republicans are going to have the freedom of
maneuver they'll need to recover in some of those blue states where
they've significantly eroded.

GILLESPIE: I think they will. Let's understand something. This
is a conservative district. This is a district where a conservative
-- this is not some swing district where having a moderate Republican,
not a liberal Republican, but a moderate Republican who may vary with
the party on some things has a better change of winning here.

(CROSSTALK)

GILLESPIE: ... conservative Republican.

(CROSSTALK)

GILLESPIE: I agree, but I just -- I don't think it's right to
read too much into New York 23, in terms of this civil war that I'm
reading about...

SHARPTON: Newt Gingrich was the one that said it. And I think
we should read all we could.

(LAUGHTER)

I encourage civil war all over the Republican Party.

(LAUGHTER)

And I'm very encouraged, on a Sunday morning, to hear you, Ed,
admit that the Republicans' candidates are chosen by these 11 guys at
the top.

GILLESPIE: Not always.

SHARPTON: And I hope the masses of the Republicans rebel and
divide all over the country.

GILLESPIE: My point, Reverend, is that was the exception.
That's one of the things -- you know, usually, our nominees come
through a primary process where the voters have a chance to express
themselves.

MYERS: Really important point, which is the Democratic Part was
able to take back the House in 2006 with a big-tent strategy, by
opening the party to people who didn't agree on every ideological --
you know, the Heath Shulers of the world.

Will the Republicans be able to do that, if they want to win back
the House in 2010?

GILLESPIE: One of the points I make, Dee Dee, all the time, is,
look, if you look at what the Democrats did, they were very smart
about it. They did get districts, one, carried by people in Oklahoma,
Texas, other places, predominantly Catholic areas, where they might
not agree on abortion as the party platform.
But in doing so, in winning the majority in the House, they did
not -- their party did not move to the right. The Democratic Party,
if anything, moved to the left in that process. So I think there's a
lesson we've learned there.

STEPHANOPOULOS: You're now going to see this play out in other
races. We've Marco Rubio challenging Governor Crist for the Senate.

WILL: And primary...

(CROSSTALK)

WILL: He will win.

STEPHANOPOULOS: He will win?

WILL: Absolutely. Absolutely, he'll win.

STEPHANOPOULOS: Against the popular governor of Florida, the
state of Florida?

WILL: Look -- look what the local caucuses are saying in their
straw polls. Look at who votes in an off-year, closed primary. It
will be the ideologically intense, and Rubio will get them.

BROWNSTEIN: You know, the problem with the civil war metaphor is
it implies two equal armies contesting on the battlefield. There is
not a civil war in the Republican Party.

You have a dominant conservative wing that is a larger share of
the Republican coalition, by far, than the liberals are, by the way,
of the Democratic coalition. And then you have, kind of, a moderate
to liberal -- not even liberal -- remnant that is declining in
influence.

And the -- and the ability of the moderate side of the party, I
think, to, kind of, shape the definition or the image of the party is
very limited.

And I think what you saw -- I agree with you; New York 23 is a
conservative place. You can't read too much into it. But I think it
is part of an overall continuum in which, after Bush, after McCain,
the conservative part of the party is saying, look, we lost not
because we were too moderate but because we were -- not because we
were too conservative; because we were too moderate.

And I think they will -- I think there is going to be a tight
leash on Republican leaders in terms of how far they can deviate from
a small government message in the next couple years.

WILL: Independents -- independents are moving to the right in
droves. Gallup says the number of Americans who identify themselves
as liberal is down 20. Those identifying as conservative, Reverend,
are up to 40. That's two times 20.

SHARPTON: I think you've got to redefine what conservatives are,
now. I think that a lot of what people who used to call themselves
conservatives, they're the extremists. They want to change America as
it has become. I think we are now the conservatives. We're trying to
conserve the America of the last 40 years that is making the progress
you talked about.

STEPHANOPOULOS: One feeling I think a lot of those conservatives
have -- I mean, and you see this across the polling -- independents
are going up in every poll. But these are, as Ron suggests, is Perot-
like independents, really, really angry, right now. And that could
cost Jon Corzine from your neighboring state, New Jersey, his race,
even though he's ahead right now.

SHARPTON: I think unfairly so. But I think you're right. I
think that Corzine was impacted in his tenure as governor by what
happened in terms of the national economy and things that were beyond
his control.

I have been in New Jersey. And I've been on the ground there,
and I think that the problem there is trying to get that message
through and to really raise a lot of the things concretely that he did
do in the state.

And I think that is going to be a close election. And I think
he'll win.

(CROSSTALK)

STEPHANOPOULOS: But in that state, you've also, though, got more
of a moderate Republican challenging the Republican nominee, and he's
costing Chris Christie, the Republican, how many votes, as well.

GILLESPIE: For right now...

STEPHANOPOULOS: Third party.

GILLESPIE: Yes, a third-party candidate. But, look,
independents -- New Jersey's the first state in the union with a
plurality of registered independent voters. They tend to be -- have
been leaning Democrat for years, but they are fed up with the
spending. They are fed up with the taxes. They're tired of seeing
businesses run out of the state and they're tired of seeing one-party
rule in Trenton.

And what we're seeing now is a reaction to that. And we've got
wind at our back for Chris Christie. I think Daggett's numbers will
come down between now and Tuesday, and they will accrue to -- they
will go to Christie.

BROWNSTEIN: You know, you -- I think you are going to see some
warning signs for Democrats out of this election. I mean, you can
make too much of these -- these off-year elections, but in 2006 and
2008 Democrats won independents substantially, both in the state races
and at the presidential level.

In the last polls these week, in all three, Virginia, New Jersey,
and New York 23, independents are moving toward the Republicans,
largely, I think, around a size-of-government, scale-of-government,
cost-of-agenda argument. I think you're going to see more pressure
from Democratic centrists next year as the result for some kind of
deficit reduction.

STEPHANOPOULOS: I want to get into that, because...

BROWNSTEIN: Can I just -- one quick point, having said that,
President Obama's approval rating has stabilized over 50 percent with
unemployment at 9.8 percent. When unemployment hit 9.8 percent under
Ronald Reagan in July '82, he was at 41 percent approval. There is
still a substantial base that supports Obama that puts him in a
different position than Clinton was in, both legislatively and
politically heading into that first midterm.

STEPHANOPOULOS: Right now I think that's exactly right. I think
the other thing you're going to hear from Democrats, Dee Dee, if,
indeed, Republicans win in both New Jersey and Virginia, is that in
these off-year elections, those states always go to the out-party.

But if both states, both Virginia and New Jersey, go to the
Republicans, that could have an impact on this health care debate.

MYERS: It could. You know, it could make a lot of Democrats --
or moderate Democrats in both the House and Senate very nervous. I
mean, there is backlash against -- this can't be completely attributed
to a bad economy and to an unpopular incumbent in New Jersey.

There is something afoot in the land that people are
uncomfortable about, and one of the issues is spending. And that's
probably the biggest issue.

WILL: Well, that's right. I mean they've seen, A, on Friday, we
had the biggest contraction of the stock market in six months. The
jobs numbers come out, and they say, well, the GDP is growing. People
say, well, so what, where are the jobs? We've had "Cash for
Clunkers," which was a government-engineered automotive bubble that
promptly collapsed.

Our next stroke of genius in managing the economy from Washington
will probably be to extend the $8,000 tax credit for first-time or
multiple-time home-buyers, which is to say a government subsidy to get
people into houses they cannot afford to be in.

GILLESPIE: And by the way, the "Cash for Clunkers," you know,
which was a vaunted success supposedly, it turns out each of these
cars, apparently, $24,000 per car is the estimated cost of these. The
jobs that they attribute to stimulus, $71,500 per job. We're looking
at now having $540,000 per household in debt imposed by this
administration. That is jarring to people, and the jobs aren't there.
The fact is, is that we saw Jared Bernstein, a White House
economic adviser, on TV last week say that they expect job creation to
begin the second half of next year, eight months from now.

STEPHANOPOULOS: Of course, what the White House says and their
economic advisers say is that without these programs that we would
have had 2 or 3 percent less...

(CROSSTALK)

SHARPTON: And no one is more concerned about the 9.8
unemployment rate than I am. But at the same time, you have to stop
the job loss. I live in New York. People forget that when we saw the
Wall Street companies go down, the financial services jobs that
ordinary people lost on the ground, we had to stop the hemorrhaging.
And I think that a lot of Americans which is why President Obama's
poll numbers are staying as high as they are, understand that he
inherited a bad hand.

He got the key to the bank with no money in the vault and the
people that took the money are asking him, why aren't we making
withdrawals? I think he has got to deal with what he was handed, and
I think that that it is not just blaming the Republicans, it's
reality. He was handed a bad hand.

BROWNSTEIN: You know, there's a short term and a long term arc
to be looking at here. I think that in the near term you do have
movement among independents toward a -- especially white independents,
toward a more skeptical Perot-esque view of government, and you add to
that the fact that the electorate in 2010 is going to be older and
whiter than the electorate in 2008, and younger and non-white voters
are the core of the Democratic Party. That kind of adds up to what
could be a difficult election in 2010.

But if you look over the longer arc toward 2012, I do have to
wonder if Republicans are drawing the right lessons here, because in
some ways they are responding to Obama's effort to expand government
by becoming more aggressive in their proposals to retrench (ph)
government.

You had four-fifths of House Republicans vote this spring to
convert Medicare into a voucher for everybody under 55. And you've
had three-quarters of House and Senate Republicans vote this year to
lower the top marginal tax rate for the wealthiest to 25 percent, the
lowest level since 1931.

Now that's not going to be part of the debate in 2010. It's
going to be a referendum on Democrats. But when you get to 2012, if
that is the trajectory of the party, I think Obama has an excellent
chance of recapturing some of those independents who are skeptical.

STEPHANOPOULOS: A lot will depend on whether health care passes,
and what kind of impact it has had on people by 2012, as well. And
this week we did see some major movement. You saw the House of
Representatives announce their bill, also Senator Harry Reid on this
whole issue of the public option, choosing to side with his Democratic
base rather than Olympia Snowe, who the president had decided to go
with on the public option.

Yet what he couldn't say at the end of that press conference was
that he had the votes to get this to the floor and pass it.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: We have 60 people in
the caucus, it's -- the comfort level is kind of -- we all hug
together and see where we come out.

(END VIDEO CLIP)

STEPHANOPOULOS: A gamble forced by necessity, right, George?

WILL: Yes. Now the president has now declared swine flu an
emergency because the government hasn't done very well in coping with
an epidemic we saw coming. Now at this very moment we're saying what
we ought to do is expand radically the role of government in handling
health care.

At the last count I heard, this 15,000 -- 1,500-page bill has the
word "shall" in it. "You shall do this." "Government shall do this."
"States shall do." That's the polite way of saying, "must," 3,425
times.

WILL: And they say this is not government takeover of the health
care system? It's preposterous.

SHARPTON: It is government protection of citizens, 50 million
people uninsured, with all of the...

WILL: Fifty? The president says 30.

SHARPTON: Well...

MYERS: Forty-seven.

SHARPTON: ... 47, if you want to be exact. I don't have the
exact numbers of how many times "shall" is in the bill, so let me be
exact with...

(LAUGHTER)

... 47 million people uninsured who have not been protected and
who, I might add, in the Reagan years, Bush senior and Bush junior
years, it just sat there.

I think the fact that this president has been able to move a -- a
dialogue forward and different manifestations of a health care package
to where it has passed five committees and we're on our way to some
kind of movement, here, is nothing short of amazing.

And I think that he ought to be saluted for that. The American
people should be protected by the government.

STEPHANOPOULOS: Democrats are convinced that failure here is not
an option and that victory will put to rest a lot of the anxiety that
people have right now. Yet, at the same time, you're likely to see,
if this bill does go through, at least over the next year or so,
premiums continue to go up. Yet voters will also, for the first time,
say they can't be denied health insurance if they're sick.

So how does that trade-off work?

GILLESPIE: I think -- George, I am stunned by this, I have to
say. I always thought, and I've said, you know, before, here, that I
thought that they would get to a bill that they could pass that had
bipartisan support, that was scaled back, that didn't have the public
option.

They have gone whole hog. This bill is a monstrosity. And from
a Republican perspective, if you look at the mandates in it, the taxes
in it, the cutting of Medicare for seniors, the federal funding of
abortion, it is -- I feel like one of those old game shows, where you
take the shopping cart down the aisle and try and scoop it all in, in
terms of trying to pick out, where do you hone in on this...

STEPHANOPOULOS: Yes it is rolling toward passage.

MYERS: It is rolling toward passage. And I think, you know,
Senator -- what are Senator Reid's motives in approaching the public
option this way?

Well, part of it is back-home politics. He's in a very tough re-
election. His state supports the public option, so he's taken a more
aggressive position.

I don't think anybody believes there's enough votes in the Senate
to pass this. So what's the fall-back plan? An opt-in, which brings
back Olympia Snowe. I think it's entirely possible that they pass
this.

GILLESPIE: But if they vote in the House on this bill, let me
tell you, it would be like the BTU of '93. And I've got to say...

(CROSSTALK)

MYERS: They're a little smarter about that now.

GILLESPIE: I've never felt this -- this is the first time I've
thought of this, but I've got to tell you something. I know that they
were willing to sacrifice 20 conservative Democrats, or moderate
Democrats, to get this done. I think they risk losing the House if
they try to pass this bill and they jam it through the way it's
written.

(CROSSTALK)

MYERS: That's not going to pass the Senate, so we know that's
not going to...

(CROSSTALK)

GILLESPIE: But it's going to pass the House, and those House
members are going to have voted for all these things.

MYERS: It will depend on what gets worked out in the Senate
before they go to vote in the House.

BROWNSTEIN: Can I just make two quick points?

I mean, your point about, sort of, the throwing everything in the
shopping car -- the core of this bill, an individual mandate, a
mandate on individuals to buy insurance in return for fundamental
insurance reform, paid for by slowing the growth of Medicare spending
is the John Chafee/Bob Dole alternative to Hillary Clinton in 1993.

And it says something about the evolution of the party that,
regardless of what else was in there, the individual mandate by itself
would be a bridge too far for almost...

(CROSSTALK)

STEPHANOPOULOS: Just stop there one second. Because I want --
that's -- you're right. On the other hand, now let's go hardball
politics. When this is in an election context next year, what you
have for the House members to (inaudible) they're going to be saddled
with $400 billion in Medicare cuts, and if this tax on high-priced
insurance plans passes, something that a lot of their own supporters
will call a middle-class tax increase.

How do you fight that?

BROWNSTEIN: Yes. The heart -- the heart of the choice is going
to be whether George or Al are right -- Reverend Sharpton -- is right
about what Americans want from government.

Because what you are saying is that there's a fundamentally
Reaganite moment, here, in which people are saying, look, government
is just doing too much and we want it rolled back.

What you're saying is that people are angry that government seems
to be protecting the rich and not doing anything for me. And to the
extent that Obama and the Democrats can portray health care as
something that's not for Wall Street but helping to provide security
for middle-class Americans, they have a better chance of selling it
than it might now appear.

WILL: Here is why we have two parties. The Reverend Sharpton
say the American people need protected by government. Some of us
think we need protected from government.

BROWNSTEIN: And that's the core of the argument.

(LAUGHTER)

WILL: In this...

SHARPTON: But you guys lost the election a year ago, so I think
the American people have spoken on that...

(CROSSTALK)

WILL: The Constitution is very picky about this. We keep having
elections.

(LAUGHTER)

SHARPTON: Every four years. We have three left.

WILL: Two years -- every two years.

STEPHANOPOULOS: So are you worried about this wave, if Ed
Gillespie -- is Ed Gillespie right, if this passes, that Democrats
could lose the House?

SHARPTON: I think that I'm concerned how it comes out. I think
Dee Dee is right. I don't think that it will out in the hard lines
that it is outlined. I'm sure that he will portray it that way.

(LAUGHTER)

I think that it will not be that way, and I think that, at the
end of the day, it will come down to what George Will just said.
Americans will say, does government -- is the government's role to
protect us or to protect us against government? And I think more
Americans have seen those that have had this rhetoric of protect us
against government hasn't worked.

(CROSSTALK)

STEPHANOPOULOS: That will have to be the last word. You guys
have a lot more to say. Say it in the green room.